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US: Virginia Prisons Open for Business

by Dan PensPrison Legal News
November 1st, 1998

Slave Labor Meets Hollywood

In a warehouse near the Baltimore airport in 1997, California businessman Trek Kelly observed a supplier peeling tags off crates of merchandise. Later he found a tag that had been overlooked. A tag with the words "Virginia State Prisons" printed on it.

At the time, Kelly, president of a company that supplies promotional goods to movie studios, was desperately trying to track down a long-overdue shipment of thousands of promotional vests for a 1996 movie, The Island of Dr. Moreau. New Line Home Video, which had ordered the vests from Kelly's company, Kaioti Gear, was hounding him daily and threatening a lawsuit over the delay. Meanwhile, Kelly's supplier was demanding more money, making excuses about disgruntled workers in foreign factories, and showing Kelly a pile of shredded material instead of the finished vests.

"The workers were on strike and they had thrown all the materials out of the factory because we weren't paying them enough money," is the explanation Kelly remembers getting from the supplier, Edward R. Dovner, a Massachusetts businessman.

But there was no strike by foreign workers, no overseas sweatshop. Instead, there were five Virginia prisons where for several months in 1996, prisoners earned 63 cents an hour making clothes for Dovner.

That work came to an abrupt halt on January 10, 1997, when Virginia State Police raided the prison work sites, confiscated materials, and shut the operation down. While Dovner was keeping Kelly at bay with tales of foreign worker rebellions, his attorney, Richmond lawyer Thomas B. Weidner IV, was begging the state to release the seized merchandise and materials. It wasn't until Dovner's attorney threatened a lawsuit that the state released the materials.

A year and a half later, the state police and FBI officials refuse to discuss the case because they say it us under investigation.

Virginia Prisons Opened to Privateers

In 1994, as U.S. trade negotiators threatened sanctions to protest China's use of prison labor, Virginia's then-Governor George Allen was advertising prison labor as an economic boon for private companies.

"We complain about prison labor from China," Allen said after a meeting of a government reform panel on July 24, 1994. "Well, let's have our own prisoners doing something."

To further Allen's goals, Virginia's General Assembly changed state law to allow for "joint ventures" between Virginia Correctional Enterprises (VCE) and private businesses.

"Virginia's Prisons. They Are Wide Open To Business," proclaimed a promotional brochure and trade magazine ads. Featuring a photo of a prison guard tower, the ads boasted of "willing, experienced workers," and "no employee benefit packages to fund. No pensions, health insurance, vacations or sick leave."

In 1996, VCE sought and received certification under the Federal Prison Industry Enhancement Program. The program exempts prison-made goods from interstate commerce restrictions if certain conditions are met, among them that prisoners be paid at least minimum wage.

But even with certification, obtaining approval for joint venture deals is a drawn out, complicated process, involving several state agencies, including the Board of Corrections, the Attorney Generals office and the Governor.

Apparently none of that happened with Dovner's clothing deals. According to VCE's former director, Dovner simply issued purchase orders for VCE to manufacture pants, flight suits and vests and VCE filled them.

And in the case of Dovner's purchase order, the price was right. According to information provided by Virginia DOC spokesperson Larry Traylor, it cost VCE an average of $28.19 to make each pair of Island of Dr. Moreau pants. Documents supplied by Dovner's lawyer show that VCE sold the pants to Dovner for $2.50 each.

It cost VCE $59.93 to make each Dr. Moreau flight suit, the same information shows, while the suits were sold to Dovner for $3 each. Finally, according to the state, it cost VCE $13 to make each Dr. Moreau promotional vest, which were sold to Dovner for $1.10 each.

According to Kelly, Dovner initially blamed the delays on Fine Incentives, the Texas company that Kelly originally hired to supply the vests, and which, in turn had subcontracted the work to Dovner.

"Fine Incentives gave him $130,000 and we gave him about $110,000," Kelly said.

Dovner paid Virginia Correctional Enterprises $15,751 for the vests, channeling the money through a bank in Anguilla, West Indies, VCE documents indicate.

Without the Knowledge of Anybody but Themselves

When the Virginian-Pilot newspaper broke the story in June, 1998, Dovner told the paper he had no comment "and it's really none of your business. Why don't you ask VCE?"

Later, Dovner's attorney called the paper and said his client was unaware during his prison business venture that federal law prohibits the interstate transport of prison-made goods.

"Eddie broke the law," said attorney Weidner. "He made a mistake. Absolutely. He screwed up. He didn't know about the law. He told the U.S. Attorney, 'I did it. I screwed up. I'm sorry. I'll come down and plead guilty to it. I made a mistake."

Jones said Virginia Corrections Enterprises had permission from then-Attorney General (and current governor) Jim Gilmore to enter into contracts with private companies apart from the federally sanctioned Prison Industry Enhancement program. There were two requirements, he said: The goods could only be sold in foreign countries, and they had to be shipped for export from a Virginia Port. According to Jones, such deals could be made for one-time transactions.

But Mark Miner, a spokesman for Gov. Gilmore, said there was no attorney general approval for one-time deals.

"The attorney general's office never authorized anybody not to follow the PIE procedure. That is federal law," Miner said.

In fact, said Miner, as attorney general, Gilmore ordered the investigation into VCE because the agency was purportedly making flight suits for "a company in Massachusetts that was shipping the flight suits offshore, stamping 'Approved by the U.S. Military' on them, and then shipping them back to the U.S."

In March 1998, a U.S. District Court grand jury in Richmond subpoenaed documents from Dovner relating to his contracts and dealings with Virginia Correctional Enterprises and the Virginia Department of Corrections. According to Weidner, authorities seemed interested in whether Dovner had bribed VCE officials to get cut-rate prices on prison-made clothing, a charge he says Dovner has categorically denied.

As this issue of Prison Legal News goes to press, the investigation continues, and state officials remain tight-lipped.

Sources: Virginian-Pilot, Richmond Times-Dispatch.